The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for October 24, 2003

Copyright © Brakke Consulting, Inc.
You can now use this section to jump directly to a news item about a particular company.  Simply click on the company name.
eMerge Interactive
Fort Dodge
Land O’Lakes
VCA Antech
other news:
Bioniche Life Sciences
Novartis Animal Vaccines
Pioneer Hi-Bred Int’l
>  Pfizer reported that revenues for its animal health division for the third quarter 2003 were $438 million, an increase of 56% which reflects Pfizer’s acquisition of Pharmacia in the first quarter of 2003.  (Sales for both Pharmacia and Pfizer in the third quarter of 2002 were $411 million, which is a 7% increase in revenues for the combined companies.) The company noted that strong performances by companion animal products Revolution and Clavamox/Synulox, and by the livestock medicine RespiSure/Stellamune and cattle biologicals, contributed to the division’s performance.  Revenues for the first nine months of 2003 were $1,090 million, an increase of 37% over the comparable period in 2002.  (company website) top
>  Akzo Nobel reported results for the third quarter and first nine months of 2003 for animal healthcare business Intervet.  Sales for the third quarter were  258 million euros ($299 million), a 2% decline compared to third quarter of 2002.  Sales for the first nine months of 2003 were 754 million euros ($874 million), a decrease of 8% compared to the first nine months of 2002. The company reported that Intervet has a strong exposure to the US dollar, but almost managed to offset this by better performance in the rest of the world. (company website) top
>  Wyeth reported that revenues for the third quarter of 2003 for its animal health division Fort Dodge were $209 million, a 63% increase compared to the third quarter of 2002.  Revenues for the first nine months of 2003 were $605 million, an increase of 25% compared to the comparable period in 2002.  The company attributed the increase in sales primarily to higher domestic sales of ProHeart 6 compared with the similar period in the prior year (which was impacted by significant ProHeart 6 product returns), as well as to higher domestic sales of the company’s West Nile – Innovator equine vaccine. (company website) top
>  Eli Lilly reported that revenues for the third quarter of 2003 for its animal health division Elanco were $175 million, an increase of 4% compared to the third quarter of 2002.  (company website)  top
>  Schering-Plough reported that revenues for its animal health division for the third quarter of 2003 were $170 million, an increase of 5% compared to the third quarter of 2002.  Revenues for the first nine months of 2003 were $483 million, which was flat compared to the comparable period in 2002.  (company website) top
>   Novartis reported that nine month sales of Animal Health increased to $502 million, or 7% above previous year’s achievement (1% in local currencies). Geographical expansion of new products as well as additional indications of marketed products continued to contribute significant impetus.   Nine-month operating income reached $61 million, leading to an operating margin of 12.2%. The result reflects a step-up of investments in R&D to support essential development project studies and in Marketing & Sales to power recently launched brands. (company communication) top
> IDEXX Laboratories reported that net income increased 28% to $16.0 million for the quarter ended September 30,2003. Revenue for the third quarter increased 15% to $120 million. For the nine months ended September 30, 2003, net income increased 37% to $44.7 million, while revenues increased 14% to $351 million. (company website)  top
>  Colgate-Palmolive reported third quarter 2003 results for Hill’s Pet Nutrition.  Healthy results both domestically and internationally contributed to 3.5% unit volume growth in the third quarter. This growth is on top of a very strong volume increase in the year ago period. Dollar sales rose 9.0% versus third quarter 2002 and dollar operating profit increased 15%.  Volume growth was driven by the continued success of Hill’s Science Diet Nature’s Best and the initial sell-in of new Science Diet Advanced Protection, for adult dogs and cats. Off to a great start in the veterinary channel is Prescription Diet m/d, a low carbohydrate diet clinically proven to alter metabolism for effective weight loss in cats.  Hill’s is reported as 13% of company sales, which were $2.52 billion in the third quarter.  (company website)
>  Nestlé announced that sales for the first nine months of 2003 for its Petcare division showed real internal growth of 2.3% at 7.2 billion CHF ($5.4 billion). (company website)  top
>  VCA Antech, Inc. reported financial results for the third quarter ended September 30, 2003 as follows: revenue increased 16% to a third quarter record of $133 million; net income increased to $13.5 million. After adjusting for the impact of debt retirement costs incurred in 2003 and 2002, the third quarter 2003 adjusted net income increased 60% to $14.5 million compared to the prior-year quarter. The Company also reported the financial results for the nine months ended September 30, 2003 as follows: revenue increased 13% to $381 million; net income increased to $34.0 million. After adjusting for the impact of all debt retirement costs incurred in 2003 and 2002, as discussed above, adjusted net income increased 57% to $39.4 million for the nine months ended September 30, 2003 compared to the prior-year period. (company press release) top
>   Land O’Lakes, Inc. reported its third quarter and year-to-date financial results. Year-to-date, sales were $4.4 billion with net earnings of $43 million, compared to sales of $4.3 billion and net earnings of $35 million in the first nine months of 2002. For the third quarter, traditionally the company’s weakest, Land O’Lakes reported $1.58 billion in sales and a net loss of ($1.4 million), compared to $1.4 billion in sales and a net loss of ($12 million) in 2002. Feed sales through September were $1.8 billion, and remain basically even with one year ago. (PRNewswire)  top
>  eMerge Interactive, Inc. announced third quarter and nine-months results for the period ending September 30, 2003. Revenues were $254,000 and $739,000, respectively, compared to $133,000 and $458,000 in the comparable prior year periods.  Net loss for the quarter was ($2.0 million) compared to a net loss of ($5.7 million) for the third quarter 2002.  Net loss for the nine months was ($7.1 million) compared to ($26.8 million) in the comparable period in 2002.  (company press release) top   
The debate on the use of non-therapeutic use of antibiotics in animal feed has in the past few years has increased the emphasis on the possible use of “natural” products as a possible replacement.

Several years ago Brakke Consulting, Inc. issued a report on Direct Fed Microbial products and Enzymes as part of this group of natural products. We have now updated those sections and added two more — acidifiers and botanicals — to make a more complete report.
The report answers the following questions:

–  Has the increased emphasis on these products led to a dramatic sales increase? The report details sales by product group, species and global region.
–  Who are the main players involved in this business? The report profiles 17 companies who we believe hold at least 80% of the market.
–  What do producers and veterinarians think of these products? We conducted a small market survey and selected producer comments are incorporated into the report.
–  How are these products regulated? Sections on the US and European product regulations are included.
–  Just what are acidifiers used for? The report discusses obvious and not so obvious uses.
 –  What products are involved in the section on Direct Fed Microbials? The report segments products by main type and offers a commentary on each.

In total this report of 100 pages looks in depth at emerging products, trends and uses of products, and the outcomes of use these products which we now call Nutritional Growth Enhancers.
If your company currently participates in this market segment, or competes with it, we believe you will find value in the insights and direction provided in this report.
For information or orders, please call 972-243-4033 or email John Short at
>  DSM Group announced that the recently acquired Roche Fine Chemicals and Vitamins division has been renamed DSM Nutritional Products.  The acquisition was completed on September 30.  (Feedstuffs) top
>  Pfizer announced the launch of a new diagnostics program to help swine veterinarians and producers successfully control disease.  Called STOMP PLUS, the program generates data and understanding of disease threshold levels, while adding flexibility to test for multiple diseases at any age or stage of production.  STOMP PLUS is the successor to Pharmacia’s STOMP and Pfizer’s Bottom Line Diagnostics programs.  (company press release) top
> Novartis announced plans to close its Overland Park, Kansas, office – home to a management center for Novartis Animal Vaccines, Inc. (NAVI) – by mid-November. Company functions now carried out in the management center will be transferred to other Novartis locations in Bucyrus, KS, Larchwood, IA or Greensboro, NC.  Novartis formed NAVI through the purchases of Grand Laboratories and Immtech, Inc. in 2001.  (company press release) top
> Monsanto received FDA approval to manufacture Posilac powder at its plant in Augusta, GA.  The regulatory green light means that Monsanto can now begin shipping the powder to the company’s Austrian partner, which formulates the powder into a gel and loads it into syringes before shipping it back to the US for distribution.  The Austrian company (unnamed in the press article) has produced powder for Monsanto since 1987. (AnimalNet – Knight Ridder Tribune)  top   
>   After rolling out its business venture in the beef market a couple of months ago, VeriPrime has expanded into the pork market. It has established a new, long-term relationship with, including its division eHARVEST and its subsidiary PigCHAMP, which reaches 75% of North American pork producers. The group will provide information and database management services to VeriPrime Pork. (Wattnet Meatnews)  top
>  Embrex, Inc. announced that the company was selected as one of the 200 Best Small Companies in America by Forbes Magazine for the fourth consecutive year. Embrex was ranked 158th among the 200 Best named in Forbes’ October 27, 2003 issue. Forbes’ selection process starts with a screen from William O’Neil & Co.’s database of more than 3,500 companies whose latest 12-month sales were $5 million to $600 million. (company website) top
>   CANADA  Bioniche Life Sciences announced results of a study at the university of Nebraska using a Bioniche-manufactured E. coli O157 vaccine that showed a significant reduction of the deadly bacteria in the manure of cattle who were vaccinated compared to unvaccinated controls. Vaccination of cattle in the University of Nebraska research feedlot reduced E. coli prevalence an average of 59% compared with unvaccinated cattle, The vaccine produced by Bioniche for the 2003 study was a scaled-up version of a prototype E. coli vaccine developed at the University of British Columbia. top
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> US   Two new cases of BSE have been discovered in Italy.  The two animals together with 39 other susceptible cattle were destroyed. A total of 60 other ruminants present at the outbreak were also destroyed. The two animals with the disease were an 11 year old cow from a dairy herd and a 15 year old cow from a beef herd. The two cases were detected as part of the routine active surveillance program, but in these two cases, the immunohistochemical and immunobiochemical patterns observed were different from those usually seen in BSE cases. The OIE said that noticeable differences in the brain region distribution of prion protein (PrPsc) deposits were also observed. (Wattnet Meatnews)
>  NEW ZEALAND  An outbreak of postweaning multisystemic wasting syndrome has been identified at a pig farm where one-third of the piglets have died.  Until now, New Zealand and Australia have been among the few countries that have had no cases of the disease.  Final DNA results won’t be available for 2 weeks, but other clinical and clinicopathological tests are indicative of the disease. (AnimalNet – ProMed mail)  
>  US   The 8th Circuit Court of Appeals will not hear an appeal over its previous decision that the national beef checkoff is unconstitutional. In July, a three-judge panel considered an appeal of a ruling from a district court judge, but upheld that ruling.  Checkoff supporters then asked the full appeals court to review the ruling. The court decided a rehearing was unnecessary without issuing an explanation. Among the limited legal recourses left to the USDA and other checkoff supporters is to petition the U.S. Supreme Court. But observers say it’s unlikely that the Supreme Court will consider the case given the latest ruling. Two federal courts have now reviewed the issue and ruled that the checkoff violates producers’ free-speech rights under the First Amendment. States are starting to scramble to organize their own checkoff programs. Texas passed legislation last week to start a statewide checkoff. There is still no word on the national pork checkoff appeal, nor is there a timetable for a decision. (Pork Alert)
>  US   A three-judge panel of the 6th Circuit Court of Appeals in Cincinnati rejected the appeal from the USDA and Michigan Pork Producers Association regarding the constitutionality of the pork-checkoff program. The decision stated that that “the district court properly invalidated the pork act in its entirety.” The USDA and Michigan Pork Producers Association can appeal to the full 6th Circuit Court or take it directly to the Supreme Court. (Drovers Alert)
>  US  The FDA released a new guidance document that  outlines a comprehensive evidence-based approach to preventing antimicrobial resistance that may result from the use of antimicrobials in animals.  The document, Guidance for Industry (GFI) #152 (“Evaluating the Safety of Antimicrobial New Animal Drugs with Regard to their Microbiological Effects on Bacteria of Human Health Concern”), is not a regulation.  Instead it explains a science-based, three-part process that drug sponsors may use when they seek approval of an antimicrobial for use in food-producing animals. (AnimalNet – FDA press release)
>  US   The New York state governor has signed legislation designed to improve the overall health of New York’s farm animal population.  The new law will expand the state’s existing Cattle Health Assurance Program to include other domestic farm animals. (AnimalNet – Cattle Health Reports)   
>   Pioneer Hi-Bred International Inc. has been cleared of violations in an incident where corn, genetically designed to resist a pest, got mixed up with neighboring crops. The company will not face any more fines for the mix-up last year at a test site in Hawaii, according to a deputy administrator of biotech regulation for the USDA. The seed company already paid $72,000 to the Environmental Protection Agency last April for failing to promptly tell government officials that the rootworm-resistant corn had strayed into a nearby field. top
The first of the third-quarter reports and year-to-date revenues appear positive for most companies.  It takes some in-depth review and analysis to provide the real story on the year-over-year comparisons.  Generally, 2003 has been and will be a good year for the industry.   We believe that the fourth quarter results for most of the companies will be strong.
All indications are that stocker, feeder, and fat cattle prices will remain strong through the fall.  The timing on opening the border to Canadian cattle is an issue.  This should also have a positive impact on poultry and swine markets.  In companion animal, there is no indication that pet owners are cutting back on spending for veterinary services or products.  With modest gains in the pet population and some new products, 2003 and 2004 should see reasonable growth.
I returned this week from a successful pheasant hunt in South Dakota, and can’t wait for the next trip.  This type of field research should be carried out more often, by more people.
Have a great weekend.
Ron Brakke

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